Bridging opportunities in 2018
Paresh Raja (pictured) is chief executive of Market Financial Solutions
Despite the doom and gloom predictions following the Brexit referendum, the UK economy has demonstrated its resilience by continuing to attract private investment across both alternative and traditional sectors.
The bridging sector has benefited from this strong performance – gross annual lending totalled £4.6bn in Q3 2017, and more than half of brokers are positive about the outlook for the sector in 2018.
By offering investors the chance to overcome mortgage delays and potential gazumping, the bridging market remains an important source of finance for those seeking to take advantage of property investment in a market abound with opportunities.
The rise in bridging activities comes amid figures released by UK Finance in January 2018, which showed that 36,115 mortgages were approved in December 2017, the weakest level since April 2013.
The data led Samuel Tombs, chief UK economist at Pantheon Macroeconomics, to remark how traditional home loans were “falling off a cliff”. Against this significant trend, the steady rise in bridging loan volumes can be expected to continue.
Looking beyond industry statistics, there are two other factors that will determine how the bridging market will perform in 2018. The first is investor confidence – namely, their confidence and willingness to invest capital in UK-based assets.
The second is the underlying performance of the property industry, measured through the volume of transactions, house price growth and the level of market demand across both the country’s commercial and residential markets.
A high-performance property market supported by a confident investor community will likely have a positive effect for bridging providers. Industry figures suggest 2018 will be a year full of opportunities for the bridging sector, projecting its appeal to both investors and borrowers.
An investor survey among more than 2,000 UK adults by Market Financial Solutions (MFS) at the beginning of the year revealed that 77% of investors are not concerned by the long-term impact of Brexit of their investment strategy, while 63% consider property a safe and secure asset in the current market.
What’s more, with average UK house prices still creeping up and the volume of commercial property investment likely to exceed £50bn this year, the determining factors are clearly in favour for bridging.
Outside of London, cities such as Manchester, Liverpool, Leeds and Birmingham are offering fantastic opportunities; bridging ensures buyers are able to act quickly on their property investment intentions, allowing them to avoid stringent lending regulations imposed by high street institutions.